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Cutting cost is no more an option. It is a must-do that is high on the priority of every organization that wants to survive this slowdown.

And no stone is left unturned to find ways to achieve that.

Interestingly, this anxiety to cut costs will result in a business that IDC expects will grow to $42 billion by 2012. Or so it seems.

Yes, we are talking about cloud computing.

If you are wondering how this business of IT keeps throwing out new jargon and concepts in the air in frequent intervals, let me say that you may already be using cloud computing to some extent.

John McCarthy had predicted way back in the early 60s that Computation will someday become a public utility and it looks like his prophecy is coming true now.

If you use Google docs, you are a participant in cloud computing. Some common Cloud computing applications are Salesforce.com, Google apps, etc. Cloud computing is nothing but software or technology made available over the internet as a service.

Infrastructure as a Service (IaaS), Software as a Service(SaaS), Platform as a Service(PaaS), Web 2.0 etc. are all components of Cloud Computing. When you use applications such as those offered by Google Docs (Word, PowerPoint and Excel) you are using Software as a Service. Conventionally, while you paid and had Microsoft Office with MSWord, MSPowerpoint and MSExcel installed on your PC, with Google Docs, you don’t buy the licenses or install any software, but can still access the applications on a need basis – over the Internet. For now, Google docs is free, but imagine being charged for access (by time, by kind of features you use, by frequency etc).

The big difference is that now you don’t need to pay the full license price of Microsoft Office regardless of how extensively you use that investment, but pay only to the extent you use. That is potential saving for sure. When core packaged apps like Enterprise Resource Planning, CRM, etc are made available on demand, there is a huge potential for savings – you don’t pay heavily for license, you hire fewer resources, you don’t invest heavily in CapEx – meaning you don’t need to buy servers and other hardware, and you don’t run huge fixed costs for managing them.

Here is the table I lifted off the IDC report. Note that these figures and the data applies specifically to Asia Pacific (excluding Japan).

Cloud Computing. Source: IDC

This data is restricted to those that are already adopting Cloud computing in some form or the other. That shows an awful lot of business potential from Asia Pacific if you ask me. But if you remember the old ASP story – a similar hype similar model, but it went through a silent death. Nonetheless, the new avatar of SaaS might just see a longer life.

This slowdown is going to create some interesting applications of technology trends and innovation. My sense is that the economic crunch can be so bad that it will squeeze out the best of our collective innovation abilities.

Liked your post. I agree that tough times will really drive innovation on how IT products and services are consumed. The Cloud may well be one of the solutions.

The real driving force is Virtualization and this is the primary difference between the ASP model and the Cloud/SaaS model. Virtualization on every level has meant that you can “squeeze” more out of your infrastructure. Add the pervasiveness of the internet suddenly all your infrastructure does not necessarily have to reside in one place.

@Sanjay: You said it. I had the opportunity of looking at ASP solutions from real close – and was even involved in the development of two products. Trust me, the proposition for a hosted solution seemed very promising at that time – and we had invested quite a bit of effort into that model. VCs were pumping money into ASP start ups and the market was sitting up and it really did seem like ‘tomorrow is here’. But the ASP model didnt turn out to be a disruptive concept in the end.
Looking back, the reasons we gave for its failure were not as accurate as we can make them now.
We can give a lot of reasons why ASP failed, but the most interesting reason according to me is quite oblique. Looking at the way the market is warming up to SaaS i now think that perhaps the market then didnt have a very compelling need to cut cost or need to look at ways to spend less.

I think you always need to be in a corner to think radically and DO radically. And the markets this time have really pushed everyone there.